Hub-and-spoke war heats up?

Hub-and-spoke war heats up?

Thursday, September 01, 2011

In the same week as Maersk Line announced a competitive new direct connection from West Coast South America into Mediterranean Shipping Co.'s East Mediterranean heartland, MSC appears to be putting a brazen spanner in the works for Maersk Line and its partners between Oceania and the Americas.
However, appearances can be deceptive, and on closer analysis it is probably Pacific International Lines' triangular Asia/California/Oceania/Asia loop that MSC is targeting.
Maersk's move had already been trailed for some time. Its Andean loop from West Coast South America makes calls at Algeciras en route to North Europe, and its new intra-European subsidiary Seago lists atypical feeder connections between Algeciras and Ambarli (West Istanbul) and Ambarli to Poti (at the eastern end of the Black Sea), suggesting a cargo buildup phase in progress. Conceptually, it is very similar to the recent extension of an East Coast South America/Algeciras loop onwards through Suez to the Middle East.
By contrast MSC's new Oceania loop from Australia-New Zealand to Balboa and Long Beach comes as a complete surprise. The line had only connected West Coast North America with Oceania via Asia, and has only comparatively recently switched its 'Golden Gate' loop to connect from Oceania with the U.S. East Coast via Singapore and Suez.
Maersk's ECUMED loop is a logical hub-and-spoke development in the classic mold, interesting only in that it firstly adds another Ecuador-Panama spoke to its twin hubs at Balboa-Manzanillo; then a hub-to-hub leg between Panama and Algeciras; and finally a new Algeciras spoke to Istanbul and the Black Sea. The full rotation, employing eight 2,500-TEU ships weekly is Guayaquil, Balboa, Manzanillo (Panama), Algeciras, Izmit Korfezi, Ambarli, Novorosiysk, Odessa, Ambarli, Izmit Korfezi, Algeciras, Balboa and Guayaquil. It wrong-foots MSC only in that the Geneva-based carrier has to transship twice to offer the same service, once in Panama onto its California Express loop and then again in the West Mediterranean to reach the Black Sea. However, MSC's California Express ships are 4,600 TEUs.
The new MSC Oceania loop will have ships of 2,200 TEUs. Claiming to be fortnightly, no pro forma transit details have been supplied, only that it will have a Long Beach-Melbourne transit of 17 days. In concept it is a hybrid; part hub-and-spoke, and part non-spoke. Northbound it provides two spokes for the line's hub in Balboa, one inwards from Oceania and the other outwards express to Long Beach. The first spoke is a completely new link connecting from Oceania with an array of services that also call in Balboa; to West and East coasts of South America, the U.S. East and Gulf coasts, Mexico, Central America and the Caribbean. From New Zealand it may also be competitive to Europe. The second spoke leg, from Balboa to Long Beach, runs beside the fairly recently introduced California Express, running right up the western seaboard via Balboa. This is important because it avoids the Jones Act prohibition on relaying Oceania cargo for Oakland and Seattle via Long Beach.
Southbound the new loop runs express from its single Long Beach call to Melbourne, Sydney, Brisbane, and then a single New Zealand hub call at Tauranga. It adds to MSC's trans-Tasman offering between Australia and New Zealand alongside its Capricorn and Kiwi loops.
Maersk recently dropped completely out of the Pacific Northwest trade with Oceania, and shares weekly 2,600-TEU Pacific Southwest sailings from California with Hamburg S'd, Hapag-Lloyd and CMA CGM. Their ships call in Auckland en route to Australia, so MSC can easily get to Melbourne three days ahead of them non-stop, with an entire ship of its own. Finally, Maersk and partner Hamburg S'd, (with Hapag-Lloyd as slot charterer), have a joint Oceania/Panama spoke of their own using 3,300-TEU ships. This Maersk-Hamburg S'd loop bypasses Maersk's Balboa hub northbound and passes through the canal before calling at their respective hubs on the Caribbean side at Manzanillo (Panama) and Cartagena. The fourth PSW partner CMA CGM has its own separate service in this trade.
The southbound leg of MSC's new loop is much more interesting when compared with that of a recent interloper in the trade lane, Pacific International Lines (PIL) based in Singapore. This persistent adventurer began a transpacific eastbound service to Long Beach, returning via Oceania to Asia. It is not a new tactic, having been adopted by CMA CGM as a means of gaining entry to the West Coast North America/Oceania joint grouping.
What is particularly interesting is how closely MSC appears to be 'shadowing' the same West Coast North America-Oceania leg of PIL's nine-day frequency 1,500-TEU service. By calling Australia first, PIL already cuts two days off the PSW loop's transit times to Melbourne, Sydney and Tauranga. It returns to Asia via Brisbane to call Kaohsiung and Qingdao. MSC is aiming to cut an extra day off PIL's transit from Long Beach to Melbourne, before continuing, like PIL, to Sydney and then (via Brisbane) to make an identical call to PIL at Tauranga.
The close similarity between this non-spoke southbound element of MSC's new Oceania Express and PIL's southbound leg from Long Beach to Oceania makes it possible to suggest that MSC's latest move combines northbound spokes to/from its Balboa hub and a good old-fashioned 'fighting' leg southbound, which would obviously result in denying particularly PIL, (as well as the PSW), as much southbound cargo as possible.
A similar 'shadowing' may have taken place just before The Containership Co. withdrew its transpacific service earlier this year. In an effort to win more cargo TCC moved its last outbound Asian port to Qingdao. The MSC-Maersk-CMA CGM vessel sharing Eagle loop was noticed, soon afterwards, also sailing last port out from Qingdao, at an identical speed to TCC, also for Southern California. Since TCC's departure, no one sails last port out from Qingdao direct for Los Angeles-Long Beach; not even PIL.
Obviously, what happens next will be the key to understanding the dynamics of what is happening. If PIL beats a hasty retreat, will MSC remain independently in the trade or share slots with the PSW, or will its new loop switch to returning southbound via Panama?
Whatever the next moves are, ComPair Data will track it. ' Francis Phillips